Speech by Executive Vice-President Dombrovskis at the European Parliament International Trade (INTA) Committee

Speech at INTA committee

Dear Bernd, Honourable Members,

Thank you for the invitation to the INTA Committee today .

This is my last time to address you as Trade Commissioner in this mandate. Let me start by thanking you for your cooperation and support on our joint journey. And for the trust you have placed in me to pilot the trade agenda at a time of unprecedented geopolitical shifts.

I would like to use this landmark occasion to take stock of our legacy in these extraordinary times.

Every mandate has to deal with unforeseen events. But I think you will agree with me that the past five years have been especially tumultuous.

On the heels of the Covid pandemic came a cascade of further crises, shocks and profound geopolitical. The tectonic plates have shifted dramatically over the past years, not least with the US and China's competition intensifying. But not even in our wildest of dreams would most of us have foreseen Russia's horrific and illegal war of aggression against a sovereign state, Ukraine.

The impact of this war has ricocheted far and wide. It tested our resilience to the extreme. The war triggered or accelerated several systemic reforms, not least in our energy markets. But above all, it changed the way we see the global economy, strategic dependencies and partnerships. So, in the eye of the storm, how did we do? And was our trade policy up to scratch?

The 2021 Communication: An open, sustainable assertive strategy

Let me start with our trade strategy.

At the beginning of this mandate, I pledged to conduct a wide review of our trade policy, so it could help us meet the big challenges of our time, include the green and digital transition.

Having consulted our stakeholders and civil society, together we brought forward a new strategy for our trade policy. Our open, sustainable and assertive trade agenda has proven to be an extremely effective compass.

Let me highlight just a few elements across its three main pillars.

First of all, we have delivered important results as part of our trade openness agenda.

• Early on in the mandate, we set out to defend rules-based multilateral trading system and promote reform of the WTO. We had major successes at the 12th Ministerial Conference. Notably, we helped broker deals on fisheries subsidies and agriculture reform. At MC13, whereas we did not achieve all that we set out to do, it was not for the want of EU efforts and leadership. We saw the interests of a handful of members, sometimes even one member, undermine those of the majority. But we did ensure that the course is now set for further work. For example, on key issues such as dispute settlement reform, trade and development, and trade and climate. We will continue our full engagement.
• We also continued building on our worldwide web of bilateral trade arrangements. At present, close to 44% of total EU trade is covered by the EU's 42 preferential trade agreements with 74 countries.
• During this mandate, we can be proud that we concluded several major trade negotiations. This included:
• free trade agreements with New Zealand, Chile

• Economic Partnership Agreement with Kenya;
• the Trade and Cooperation Agreement (TCA) with the UK;
• an Enhanced Partnership and Cooperation Agreement with Uzbekistan;
• our first Sustainable Investment Facilitation Agreement (SIFA) with Angola
• an agreement with Japan on cross-border data-flows
• The FTA with Vietnam also entered into force.
• Here I wanted to thank the EP for your swift work on ratification and your large positive votes on these agreements

• Furthermore, we continued negotiations with India, Indonesia, Australia, Mercosur and several other trade partners. Plus, we recently resumed negotiations with Thailand, and just on Monday, with the Philippines.
• What is more, we have deepened our cooperation with our partners through other forms of engagement. These include our Trade and Technology Councils (TTCs) the U.S. and India, our ongoing negotiations on Digital Trade Agreements with Singapore and South Korea and our network of Mutual Recognition Agreements.
• This outreach went in tandem with effective work on implementation and enforcement. During this mandate, we resolved 140 trade barriers fully or partially, in more than 30 countries. This helps boost EU exports in sectors such as agri-food, pharmaceuticals and health.

We have also developed new tools to support our businesses, including particularly SMEs, which want to go international. These have included the expansion of the highly successful Access2Markets system, with new information on rules of origin and on mutual recognition agreements.

Make no mistake: our openness and global trade networks are the key ingredient for the EU's competitiveness.

Throughout this mandate, we have left no stone unturned to streamline sustainability into our trade policy.

This is why we brought forward our trade and sustainable development review.

Our updated approach has now become the reference point for all trade negotiations. Its implementation will be case-by-case, as already reflected in our recently concluded free trade agreements with New Zealand and Kenya.

At the WTO, we have advanced work on environmental initiatives, such as in the Trade and Environmental Sustainability Structured Discussions, the Dialogue on Plastics Pollution, the Fossil Fuel Subsidies Reform and last but not least the Agreement on Fisheries Subsidies.

Meanwhile, the Coalition of Trade Ministers on Climate, which I launched in January 2023, is already bearing fruit in terms of boosting inclusive cooperation on climate, trade, and sustainable development.

At the same time, the EU has continued to adopt autonomous measures under the Green Deal, such as the Carbon Border Adjustment Mechanism and the Deforestation Regulation. We tabled and adopted a proposal to eliminate forced labour from our supply chains.

Going forward, as we develop the EU's own rules under the Green Deal initiatives, we need to be attentive to the regulatory burden – both for our own companies and for partners in developing countries. There is no hiding from the fact that many third countries perceive our autonomous legislation as ‘green protectionism'. It is important for us to prove this perception wrong and support our partners in meeting sustainability requirements that we have put on table.

Perhaps more than anything, this mandate has seen a strong pivot towards our assertiveness agenda to help us navigate more effectively at a time of geopolitical tensions.

And it has meant developing new tools to better deal with the realities of today, as well as effectively using the tools we already have. All of this under the guidance of the EU's Chief Trade Enforcement Officer.

Over the past few years, in active collaboration with this committee and the European Parliament, we have adopted several new tools:

• the revised Enforcement Regulation,
• the International Procurement Instrument,
• the Foreign Subsidies Instrument,
• the updated Dual Use Regulation,
• the Anti-Coercion Instrument, which entered into force at the end of last year.

These tools come on top of existing Trade Defence Instruments. At present we have 184 (+1 provisional) trade defence measures in place to defend EU industry from unfair and injurious trade practices. Taken together, they protect more than half a million jobs in the EU.

We have added another major big building block: economic security agenda. For me, this is rather part of our openness agenda: by being more mindful of and by effectively addressing risks to the EU's economic security, we can remain open. This is why economic security strategy has three equally important pillars: promote, protect and partner.

The implementation of the strategy is underway and I see this policy to be effectively developed also in the next political mandate.

Ladies and gentlemen

Allow me to turn to two prominent bilateral relationships: the US and China. Turning first to the West: the US remains our top trading partner. Together we make up 42% of global GDP. Trade across the Atlantic has been hitting one record after another. In 2022, our bilateral trade amounted to 1.6 trillion dollars. Put another way: that is 4 billion dollars a day.

The transatlantic relationship has been critical in steering a pathway through our complex global challenges, not least Ukraine.

I believe we have overcome many obstacles.

On the trade side, we worked effectively with the Biden team to find solutions to the trade spats we inherited. For example, we landed the Airbus – Boeing dispute and found a temporary solution to Trump-era US tariffs on steel and aluminium.

We launched the EU-US Trade and Technology Council. It has become a key forum for us to cooperate on trade, economic, and technology issues. As trading superpowers, we can influence the global conversation in these areas. The TTC has also proved critical to coordinating our trade-related sanctions against Russia.

So over the past four year, we have laid a solid foundation. But we now need to build on it with commercially meaningful outcomes. In early April, we will hold the last TTC in this mandate. We plan to make progress across various important work streams, including on sustainable trade initiative, conformity assessment and digital tools to simplify trade. Needless to say, we would like this trusted platform to continue its work beyond this mandate.

At the same time, the transatlantic relationship has not been without its difficulties. The EU would have hoped for more tangible progress over the past years. A prime example is the steel and aluminium sector and the US 232 tariff rate quotas.

We regret that we did not manage to put an end to them – in spite of very hard work by our teams and constructive proposals.

Global steel overcapacity has been a serious problem for decades. It distorts the global level playing field. And it remains an obstacle to decarbonise the steel industry.

The same goes for the negotiations on the Critical Minerals Agreement. We continue our efforts to get this concluded, so that it can address certain EU concerns over the Inflation Reduction Act's discriminatory aspects.

And it would promote high levels of sustainability and labour rights along critical raw material value chains which we need for the green transition. We would have liked greater flexibility from the US side.

We will continue to work constructively to address these challenges.

Let me now turn to the East. Our relations with China remain challenging and ever more complex. China is second biggest trading partner for the EU. We value this partnership. There is no plan to cut our political, economic or societal ties.

Yet, we need to be honest and admit that our relationship is unbalanced. Trade data shows that with more than 20% of our goods imports, China is our largest supplier but it is only our third-largest customer, making up less than 9% of our exports. Last year, our trade deficit with China amounted to over 290 billion Euro. It simply attests to the fact that the EU market is much more open to China than the other way round. We observe industrial policies including harmful subsidies supporting the manufacturing sector, preferential SOE policies and other economic distortions that lead to an unlevel playing field between Chinese and European companies.

Going forward, our successors will have to stay on watch over possible overcapacities in clean-tech and digital sectors, in addition to existing concerns in traditional sectors. While applauding China's technological progress, we will have to make sure that the competition in the Single Market and globally is fair.

The relationship between EU and China has been negatively affected by the stance that China has chosen to take on Russia's illegal and unprovoked war against Ukraine. Time and time again, I have tried to impress on my Chinese counterparts here and in Beijing that the damage that the war has brought to China's reputation in Europe. The pain that Europeans feel is real. The future of the EU - China relationship is linked to the course of war in Ukraine, and to the role that China will chose to play.

In parallel, we see China growing increasingly assertive and challenging the current rules-based system, also by means of economic coercion. It has incentivised the EU to carefully look at risks that come with this important relationship. We have started to de-risk our overdependencies, especially in the critical sectors. This work will continue into the next mandate. I mentioned earlier that we now have 184 trade defence measures in place. Almost two thirds of which concern imports from China. We will continue to use our trade defence tools to keep watch.

Having said that, I believe the EU has interest in intensifying engagement with China, also to work out differences and avoid unnecessary escalation. Large economies such as ours have a strong interest in cooperating, so as to minimise the risk of fragmentation of global markets. This would come at a high cost to our own economic growth, but also for developing countries.

Honourable Members: as I mentioned in the beginning, the watershed moment during this mandate was certainly Russia's brutal and illegal invasion of Ukraine.

In the aftermath of the attack, Europe stood by Ukraine in words and deeds. On the trade side, apart from our sanctions against Russia, we provided lifeline support to Ukraine's battered economy. We did so through autonomous trade measures, the Solidarity Lanes, and the ‘Priority Action Plan'. This also helps us in the implementation of our Deep and Comprehensive Free Trade Area, and contributes to bringing Ukraine closer to our Single Market.

I really appreciate the constructive attitude shown by you yesterday night during our first and only trilogue on the extension of the ATMs. We secured an agreement which preserves our strong support to Ukraine while safeguarding the interests of EU stakeholders and the agricultural sector. I hope this will be supported by the Plenary. And that the Council process will be on track.

Of course, there is a need to keep up pressure on Russia. The EU continues to play a major role in the global response to condemn Russia for its illegal aggression against Ukraine. We are currently working on restrictions on the import of certain agricultural products from Russia and Belarus to the EU, notably grain. But at the same time: we keep our strong commitment to promote global food security and ensure that they continue to reach the global markets. So our measures will not apply to grain transit. And let's keep in mind that restricting access to the EU market will increase the available quantities for developing countries.

Honourable Members: let me make the final point on the power of trade.

Trade is like water. It flows. Until it dries up, due to poor or deliberate political choices.

Even as the value of trade keeps being questioned, let us please stick to facts.

We have seen in history that trade has lifted millions out of poverty. It brings jobs and growth and prosperity. In the EU, 38 million jobs depend on exports. This means that nearly 1 in 5 jobs is linked to the EU exports to non-EU countries.

And the costs of protectionism and fissures are simply too high. In a worst-case scenario, a fragmentation of the world economy could wipe off the equivalent of Germany and France's combined GDP share of the world economy.

We need continue to stand for fair and open trade, that ensures economic growth and prosperity. Going forward, let our decisions be based on evidence and facts, not political expediencies and perceptions.

Honourable Members

I could not have anticipated such a turbulent mandate. But I believe we can look back at this period with pride, as trade policy helped us navigate these considerable challenges nimbly and successfully.

The EU has remained the top global trader and investor, and the number one trade partner for several countries across all continents.

Let me take this opportunity to thank you all, for our close and constructive collaboration on all the trade policy topics during the past four and a half years.

I wish you a great success in your future endeavours. And I hope our paths will cross in the future.

Thank you and I look forward to hearing your views and comments.